The prospect of refashioning the UK real estate development

What I can describe London as an alpha city – Which has been a dominant and leading city in Real Estate development and investment across the globe. The term donates a pre-eminent position in the global capitalist world economic and political order. The maelstrom of urban life which results from investment makes London a site of wealth creation.

Before the outbreak of Covid-19 the uncertainty surrounded the UK property with a so-called Brexit weighted on buyers’ sentiments and that has affected the market start to decline.

UK house prices just started to recover from uncertainty amid by Brexit at the end of 2019. The victory of Boris from the Tories’ election in December set a thriving economy for the new starting decade of 2020. However, the unprecedented event caused by Covid-19 has been rattled the market ever since – and makes it particularly difficult to predict what precisely will occur in the value of housing market this year and the following year. Giving the context, lockdown in the UK expected to cost only housing market and associated businesses an estimate of £14 Billion in lost revenue in 2020.

A recession in the midst of pandemic and Brexit on the horizon has significantly affected on higher borrowing and unemployment costs in which these two factors are the sign of pressure that can stave off a mass sell-up forcing house prices down . Barclays alone has withdrawn as many loan-to-value mortgages of more than 60% for homebuyers and landlords.

The Bank of England forecasted that the UK is about to see the sharpest decline since 1706 - That’s three century ago. Falling more than 2 per cent only in May. Recent, analysts have expected the annual decline of 50% transaction around 565,000 in 2020 from 1.2m in 2019 – this is below the number of global financial crisis of 750,000. Although, the number would be expected to start re-gain from the second half of 2021 – which I personally suspect that the trend would start to revive at least for the next year.

Worth to mention that, however, this can create a potential investment opportunity –as the market is currently in a relatively decent discounted rate, will only need to consider the pros and cons of moving ahead with an acquisition now. When house prices growth is negative at a regional level it means a significant portion of local markets will be experiencing negative growth.

I have illustrated the top 5 borough of London which experienced significant rise of housing prices, including 3 borough of most noticeable decline from 2018 to 2019, shown the table below.

The UK facing a significant shortage of housing around 300,000 units per annum - Increasing demand for the housing in the UK yet, has not been met the threshold over the past few decades. Factors contributed to this cause including; property speculation, insufficient housing stocks, culture of resistance to change, lack of infrastructure and innovation, and, innovative adaptation.

There are many different ways in which the crisis of housing and more importantly the underlying causes of housing can be addressed without embarking on an unsustainable house-building bonanza.

There will be changes in consumer behaviour once the pandemic abates – The widespread implementation of working from home made the “House “10 times more important than ever to number of people – as remote and flexible working are becoming a new normal of people lives. Expanding focus from just simply building a blunt home to cultivating sustainable communities - where to create a sustainable climate in which defines the cultural and social identity of each neighbourhood.

Expanding housing market through different mechanism incentives developers - and perhaps the government can ease up some of the greenbelt for potential residential development. This can bring more supply into the market to meet the demand. The industry will certainly look radically different 10 years from now. The 9 shifts are in the prospect of occur within the next 5 to 10 years. We have already seen some robust changes across the industry such as; the modular construction which has grown in North America Real-Estate construction projects almost 50% from 2015 to 2019 – R&D has risen almost 77% since 2014 which has been neglected and hasn't been paid ample attention to, and a new breed of players has been emerging to lead the change.